Zara Uses OR to Reengineer its Global Distribution Process

Presented by Sachin Desai(125) Sandeep Sesetti(138) Suraj Patil(165)

3/26/12 • • . Its success is attributed to its fastfashion business model.Introduction • Zara is a fashion retailer with more than 1500 stores. Supply chain comprises two warehouses – one in Arteixo and the other in Zaragoza.

Supply Chain Process Stores Designers Warehouses Suppliers 3/26/12 .

The Problem 3/26/12 .

The amount of relevant information is 3/26/12 enormous. The shipment decisions must be determined only a few hours after the relevant information becomes available.The Problem • The intention is to keep a balance between keeping inventory to generate sales and mitigating the impact of missing sizes on brand perception. • • .

Legacy Process 3/26/12 .

The Solution • The Solution to the Management challenge is given by Mr. Jeremie Gallien. Their work began in mid-2005 under the executive supervision of Zara’s CFO. • 3/26/12 . Miguel Diaz. Felipe Caro and Mr.

New Model 3/26/12 .

Forecasting Model • • Relies on Regression Analysis Weighted linear combination of – Time-series data of historical sales Decentralized shipment requests by store managers – • The weight conferred to the 2nd input source by the least square fitting procedure established a credibility for store managers’ 3/26/12 request. .

Optimization Model • Predictive model for expected upcoming weekly sales Also known as Inv-to-Sales Function To predict the impact of shipment decisions This function jointly considers all sizes simultaneously 3/26/12 • • • .

Optimization Model 3/26/12 .

t. Shipments ≤ InitialWarehouseStock NetworkStoreSales = Inv-to-Sales (StoreInventory + Shipments) FinalWarehouseStock = InitialWarehouseStock 3/26/12 Shipments .MIP Model Formulation • Objective Function: Max P*NetworkStoreSales + K*FinalWarehouseStock • S.

A high value of K vis-à-vis P results in “conservative” shipments. • • 3/26/12 . K. The remaining warehouse units are valued in the 2nd term with the aggressiveness factor.MIP Model Formulation • The model’s objective includes a standard first term for maximizing the revenues through sales.

Impact • • • • Test Group and Control Group Financial Impact Organizational Impact Cultural Impact 3/26/12 .

Thank You 3/26/12 .

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